Many buyers view the pandemic as an opportunity rather than challenge. Mortgage bankers say the number of mortgage applications and amount requested keeps going up.
Homebuyers are entering the market at a much brisker pace than many economists forecasted.
Mortgage applications for home purchases continue to move upward, rising 9% last week compared to the previous week, the Mortgage Bankers Association (MBA) reports. It’s the sixth consecutive weekly gain for home purchase applications and a 54% increase since early April.
“The home purchase market continued its path to recovery as various states reopen, leading more homebuyers to resume their home search,” says Joel Kan, the MBA’s economist. “Additionally, the purchase loan amount has increased steadily in recent weeks and is now at its highest level since mid-March.”
Housing demand was strong at the start of the year but significantly declined as the COVID-19 pandemic set in.
Economists have also noticed the sudden uptick as buyers re-enter the market. The Commerce Department reported this week that newly built single-family homes saw an increase of nearly 1% in April. Inventory shortages in the existing-home market are prompting more buyers to new homes, analysts speculate.
Further, home prices continue to hold strong due to a lack of housing inventory on the market.
Buyers could be drawn to today’s record low mortgage rates. The average contract interest rate on a 30-year fixed-rate mortgage was 3.42% last week, the MBA reports. However, buyers’ pent-up demand was strong before the pandemic hit, and some buyers frustrated by the lack of homes may be viewing the current slowdown as an opportunity rather than a challenge.
“The low mortgage rates, without a doubt, are helping to entice buyers back into the market,” says Lawrence Yun, chief economist of the National Association of Realtors®. “Real estate may be viewed as a safe asset in the upcoming years.”
The dollar amount of mortgages also continues to rise. The average loan size was about $340,200 for the week ending May 22, up from a $315,300 low set during the week ending April 3, MBA reports.
Meanwhile, refinance applications have not been performing quite as strongly as purchase applications. Refinance applications dropped 0.2% last week. Still, refinance applications are up 176% over a year ago as mortgage rates hit record lows.
Source: “Mortgage Demand From Homebuyers Shows Unexpectedly Strong and Quick Recovery, as Applications Spike 9% From a Year Ago,” CNBC (May 27, 2020) and “The Summer Home-Buying Season May Be Much Hotter Than Expected – Here’s Why,” realtor.com(R) (May 27, 2020)
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